Applications experts from Schroders, a global asset management company, have developed an in-house portfolio construction tool. The system SMART (Schroders Multi-Asset Risk Technology), is a highly flexible, open architecture toolset application that produces optimal portfolios relative to a variety of client-specified investment benchmarks as well as reporting on portfolio risk.

Optimization at the core

Essential to SMART’s portfolio construction capabilities are various numerical algorithms, required by Schroders’ staff to create portfolios that trade-off return and risk. Knowing that NAG are experts in the provision of tried and tested numerical algorithms and wanting to implicitly trust the code that drives calculations within SMART, Schroders turned to NAG to provide the numerical routines.

Commenting on the latest NAG enhancements to SMART, David King, Head of Investment Risk at Schroders, said “The new functionality we have introduced into SMART allows our portfolio managers to fine tune their portfolios in terms of expected return, risk and diversification. We give them the ability to generate many portfolios that trade-off these different characteristics. In order to do this we need optimization routines that are robust, reliable and fast – our user base isn’t fond of waiting around for the answer! We found that NAG components offer just this combination of qualities.”

Shezad Lakha, Quantitative Analyst within the Multi-Asset team at Schroders, added: “Using NAG has increased our computational power considerably. We can now create 20 optimal portfolios in the same time it used to take us to create one. NAG has allowed us to concentrate on value adding enhancements without having to worry about the reliability and speed of an optimizer. NAG are true experts in optimization and mathematical algorithms. They have a wide range of numerical functions designed to solve a breadth of problems and have a support team that is committed to helping you achieve the most efficient solution.“